How changes to the GST carve up will work

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Matt Coughlan
(Australian Associated Press)

 

HOW WILL GST DISTRIBUTION CHANGE

  • A floor ensuring no state or territory will get less than 70 cents in every dollar of GST revenue collected from 2022/23, rising to 75 cents in 2024/25.
  • Benchmark to be measured against the stronger of NSW and Victoria, phased in over six years between 2021/22 and 2026/27.
  • During this transition period states and territories will get the better of the old or the new system.
  • An extra $9 billion in federal money will be delivered to states and territories over 10 years, with an additional $1 billion in perpetuity once fully implemented.
  • The Productivity Commission will conduct an inquiry at the end of the transition period to assess whether the updated system is working efficiently, effectively and operating as intended.

Changes to the GST carve-up, including a new floor of 75 cents, have cleared federal parliament after a long fight led by Western Australia to get a fairer deal.

The overall pool for states will be boosted with $9 billion of federal money over 10 years and an additional $1 billion in perpetuity once fully implemented.

The new standard for distributing the tax’s revenue will be measured against the stronger economies of NSW and Victoria.

The GST floor will be initially set at 70 cents, ratcheting up to 75 cents in 2024/25.

The laws were triggered by WA recently receiving just 30 cents in the dollar, while other states and territories with smaller populations got more.

But Treasurer Josh Frydenberg said the legislation’s passing is more than just a windfall for WA.

“This is good news for people right across the economy, ensuring that the growing GST pie is shared more fairly across the country,” he told reporters in Melbourne on Wednesday.

Labor supported the legislation, which passed the Senate on Wednesday, after the coalition government inserted a guarantee no state would be worse off under the changes.

Finance Minister Mathias Cormann said the arrangements which saw his home state of WA’s share drop to 30 cents in the GST dollar were unsustainable.

“The government has long recognised what has been happening with WA’s share of the GST was unfair and had to be fixed,” Senator Cormann told parliament.

“We have provided a national solution to a national challenge that was in the too hard basket for too long.”

WA is planning to spend most of the extra money it earns on paying down the state’s debt, its Treasurer Ben Wyatt said, describing the step as boring but responsible.

During the transition period between 2021/22 and 2026/27, states and territories will get the better of the old or the new system.

Labor seized on WA One Nation senator Peter Georgiou’s comments during Wednesday’s debate after he called for the GST revenue to be distributed on a per capita basis.

The Productivity Commission estimated that model would cost One Nation leader Pauline Hanson’s home state of Queensland $1.2 billion.

“Instead of trying to keep everyone happy, the government should announce that the distribution of GST will move to a per capita basis over a five-year time frame,” Senator Georgiou said on Tuesday.

Queensland Labor senator Murray Watt said Senator Hanson had been “conspicuously silent” on what per capita funding would mean for their home state.

“It’s about as big a sellout as you can get in Queensland,” Senator Watt told parliament on Wednesday.

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